The Ugandan government has approved a new law that levies a 5% tax on international companies that offer digital communications services like Twitter, Netflix, and Meta’s Facebook.
According to the tweet from Ugandan government, President Yoweri Museveni sought the new levy.
According to local dailies, the following are considered digital services under “The Income Tax (Amendment) Bill, 2023,” which includes the new charge:
- Online advertising services;
- Data services;
- Services delivered through an online marketplace or intermediation platform, including an accommodation online marketplace, a vehicle hire online marketplace and any other transport online marketplace;
- Digital content services, including accessing and downloading digital content;
- Online gaming services;
- Cloud computing services;
- Data warehousing;
- Services, other than those services in this subsection, delivered through a social media platform or an internet search engine; and
- any other digital services as the Minister may prescribe by a statutory instrument made under this Act.”
In defence of the tax, Minister of State for Finance (General Duties), Henry Musasizi said, “We are not looking at the digital services; we are looking at the money obtained by the supplier of these services. The money for Uber goes to California; the man makes money but doesn’t pay taxes. We are now asking, “Can there be a system in place for taxes?”
As of July 1, 2022, customers of platforms like Amazon, Meta (Facebook), Twitter, and Zoom would be subject to an 18% required value-added tax on web hosting, software and streaming services.
There are worries that this recently implemented tax will add to the already high digital taxes paid by Ugandan customers for digital services.
However, it is noted that Uganda is not the only African country to tax American IT firms. Kenya introduced a 1.5% digital service tax based on the gross transaction value, while Nigeria wants to levy a 6% tax on digital non-resident enterprises’ sales.
Income earned or accumulated in Kenya from services rendered through a digital marketplace is subject to this tax.